If the Probability of Collection Is 65%,should You Grant Credit

question 71

Multiple Choice

If the probability of collection is 65%,should you grant credit to a customer wishing to purchase a $2,000 item that cost $1,333.33 to produce? Assume all cash flows are discounted to present value and there is no chance of subsequent sales.

• A) No; the expected loss is $33.33.
• B) No; the expected loss is $150.00.
• C) Yes; the expected profit is $33.33.
• D) Yes; the expected profit is $150.00.

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Definitions:

Peace Treaty

An agreement between hostile parties, usually countries or governments, to stop fighting and establish peace.

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Military or political power exerted by European countries, historically significant in various global conflicts, colonization, and international relations.

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A series of outcome numbers, from sample statistics, expected to contain within the unknown value of a population attribute.

Democratic Candidate

A person seeking or nominated for election representing the Democratic Party in the United States.